UPDATE 3-German court may delay Europe's new bailout fund

* German opposition, coalition agree on growth deal

* Enables parliament to approve fiscal pact, ESM

* Top court wants time to study text, may cause delay

By Andreas Rinke and Sarah Marsh

BERLIN, June 21 The German government and
opposition reached a deal on Thursday on growth that will allow
parliament to approve the euro zone's permanent bailout scheme
next week, but Germany's top court may delay the rescue fund's
start date.

No sooner had Chancellor Angela Merkel's government and the
centre-left opposition announced a breakthrough in eight weeks
of talks on how to stimulate growth and job creation in Europe
than the constitutional court threw a spanner in the works.

The deal on growth gives conservative leader Merkel the
support of the Social Democrats (SPD) and Greens in parliament
on June 29 to approve her "fiscal compact" for budget discipline
in Europe, as well as the European Stability Mechanism (ESM).

The ESM bailout fund was meant to come into effect on July
1, but draft conclusions seen by Reuters on Thursday for next
week's summit of EU leaders showed they now aim to make it
operational on July 9 due to delays in the ratification process
in several euro zone countries, not only in Germany.

The ESM cannot go into effect without approval by Germany,
the euro zone's biggest economy. Full ratification also requires
the signature of the head of state, President Joachim Gauck, and
a nod from the constitutional court in Karlsruhe.

The court did not block the ESM's predecessor - the European
Financial Stability Facility (EFSF) - though it has insisted on
fuller consultation with parliament on both bailout mechanisms.

But the country's top court in Karlsruhe said the treaty's
complexity meant it would need more than just one day - Saturday
June 30 - to check that the text abided by the constitution.

"We assume that the president will, as he has done before,
comply with this request, and that the court will therefore have
enough time to conduct an examination," the spokeswoman said.

The president's office later said Gauck would respect the
court's request and would refrain from signing the ESM and
fiscal compact laws before it has ruled on the bailout fund.

Merkel's coalition was nonplussed about the ruling.

"It makes no sense for Europe to hold up the ESM because
Germany's constitutional court needs more time," said senior
conservative parliamentarian Norbert Barthle, recommending that
the court use a facility for making "express decisions".

"Given the critical situation in Europe at the moment, you
don't need much imagination to figure out how things would
develop if we had a still-stand for several months," he said.

NO EURO BONDS, PUSH FOR TAX

The most likely scenario is that the court simply delays the
launch of the ESM - which Germany wants to use for a bailout of
Spain's struggling banking sector - by a few days. Earlier this
week the same court reprimanded the government for insufficient
consultation of parliament on ESM, but the government said this
slap on the wrist would not impact ratification.

The parliamentary leader of Merkel's conservatives, Volker
Kauder, said German politicians had put aside their own party
interests to come up with a growth deal that would contribute to
stabilising the euro and resolving the sovereign debt crisis.

The opposition had demanded growth and job-creation measures
to ease the economic and social impact of Merkel's drive for
austerity in her "fiscal compact", which has been agreed by 25
of the 27 members of the European Union.

The SPD and Greens made this a condition for their approval
in parliament of the fiscal pact and the ESM. Merkel needs their
votes on June 29 to get the required two-thirds majority.

The centre left has backed the chancellor on all emergency
measures so far in the sovereign debt crisis, but has begun to
crank up its opposition language ahead of federal elections in
2013, when Merkel is expected to seek a third term.

But the government rejected proposals from the centre-left -
egged on by new French Socialist President Francois Hollande's
victory - for the 17 euro zone states to issue debt jointly.

Merkel argues that "euro bonds" or other similar instruments
would merely remove the incentive for underperforming euro zone
member states to reduce their debts and deficits.

"There will be no mutualisation of debt. Debt redemption
funds are not allowed either by the constitution or by European
treaties, and that's why we didn't agree to implement them,"
Kauder told reporters.

The SPD said they had agreed with the government to push for
a financial transaction tax in the European Union, if necessary
starting with a smaller number of willing states.

"We agreed we will aim to tax financial markets according to
the EU Commission's model of a financial market transaction tax,
and we agreed that if this is not possible with all 27 EU
states, then we will form a 'coalition of the willing' of at
least nine states," said SPD parliamentary leader Frank-Walter
Steinmeier.

The terms of the agreement in a document seen by Reuters
showed the government and opposition wanted to tax all financial
transactions if possible, and have European legislation ready
this year for consideration by lawmakers in individual states.

The agreement states that the tax needs the participation of
at least nine member states, would be based on a model proposed
by the European Commission and should in particular target
stocks, bonds, currencies, derivatives and investments.

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